PH renegotiates Northrail loan with China

MANILA, Philippines – There is more to the territorial dispute at the South China Sea between the Philippines and China. Onshore, a rail project that has been contentious for years was recently successfully renegotiated.

Instead of settling the entire US$184 million due this 2012 for the Northrail project, the Department of Finance will pay Export-Import Bank of China 4 equal payments of $46 million starting this September.

“We will be paying the amount in four tranches,” Finance Secretary Cesar Purisima recently told reporters.

A team from the Finance department met with ChinaExim Bank officials in June to renegotiate the payment terms and lengthen the payment period of a portion of the $500 million loan to two years or up to 2014.

The Northrail project received funding from the China state-owned bank and was part of scandal-driven agreement between the two countries under the Arroyo government.

The Northrail project is crucial in the planned transfer of the main international airport from the congested Ninoy Aquino International Airport (NAIA) in capital Manila to Clark in central Luzon, a sprawling location ideal for the fast-growing aviation industry.

The long-delayed railway line was supposed to connect capital Manila to areas in central and northern Luzon. The crucial infrastructure was planned as a 2-phase project with the endpoint in San Fernando City in La Union.

Aside from the financial aspect, the construction and design have yet to be completed.   

Under outgoing Transportation Secretary Mar Roxas, a review and possible revisions to the Northrail project design was underway. Roxas had said he preferred that the rail project is a fast-train than the current plan for it as a commuter line.

Court decision

The loan renegotiation comes after the Philippine Supreme Court handed down in March a decision giving a lower court the go-signal to hear the case calling for the annulment of the allegedly overpriced contract.

In the decision penned by then Associate Justice — and now Chief Justice — Lourdes Sereno, the High Court said that the contract agreement between two state-owned firms Northrail Corp. and China National Machinery & Equipment Corp Group (CNMEG) is covered by Philippine law, and, like any other commercial transaction “could be questioned before the local courts.”

Sereno noted that even if CNMEG carried out government functions, it did not submit a certification from the Department of Foreign Affairs stating that it enjoyed sovereign or diplomatic immunity.

CNMEG filed a case with the Court of Appeals after a Makati court dismissed a 2007 petition by CNMEG to dismisss the case.

Lawyers Harry Roque and Jose Butuyan asked the lower court to invalidate the contract, which they claimed, was finalized without public bidding. They added the project would also displace thousands of people who live near the project site. – Rappler.com